The composition of public expenditure and economic growth in India: Evidence from auto regressive distributed lag approach

Abstract

The present study examines the role of various components of pub- lic expenditures on economic growth in India during the period from 1980 to 2013. The study used ARDL approach to examine the long run and the short run dynamic relationship. The VECM based Granger causality test is utilized to check the direction of causality. The results reveal that there exists a long run cointegrat- ing relationship between economic growth, developmental expen- diture, fiscal deficit and gross private investment. The ARDL es- timates show significant positive long run impact of development expenditure on economic growth. However, the non development expenditure and revenue expenditure reveal insignificant impact on economic growth. The causality test estimates indicate short and long run unidirectional causality running from development expen- diture and fiscal deficit to economic growth in India